CSR - The PPI Scandal - so much for being socially responsible

The emerging details and implications of the PPI scandal in the UK are likely to provide students with some topical research evidence which they can use to write good essays on CSR.

This Guardian article provides a detailed explanation of the PPI scandal. In brief, here’s what happened.

PPI stands for Payment Protection Insurance. Customer of financial services businesses like banks, building societies and other lenders have been given the hard-sell by salesmen for almost two decades, encouraging them to take out PPI in case their financial circumstances changed and they we unable to manage those debts. Why the hard sell? Because PPi was incredibly profitable - it generated a gross profit margin of around 85% (i.e. the cost of claims on PPI policies was around 15% of the insurance premium revenues generated).

For around 7-8 years, the selling of PPI has attracted fierce criticism from consumer protection stakeholders, including Citizens Advice and many media commentators. Many PPI policies had proved worthless - they simply didnt provide the cover that customers thought they did.

For all the headlines about the sheer scale of PPI mis-selling, I think it is the personal stories behind the scandal that really help make the point about CSR. This BBC article examines the effect of PPI mis-selling on one household.

So much for the financial services industry acting in a socially responsible manner!

The PPI scandal has hit the headlines today as Lloyds TSB (remember, a bank that is owned by us - the general public) have decided not to contest legal action on PPI. They have made a provision of £3bn to cover potential compensation claims - effectively admitting guilt. Other culprits are pertty likely to follow suit.